COVER STORY: The PM, farmers, the FTA and the election

by Patrick J. Byrne

News Weekly, March 27, 2004

The Federal Government doesn't appear to have recognised the systemic collapse taking place across several rural commodity industries, partly the result of National Competition Policy (NCP), and appears set to sacrifice several other industries in the pursuit of the free trade agreement with the US.

Prime Minister Howard recently visited the sugar areas of Cairns and Mackay, although not the Burdekin region near Townsville, the largest growing area, which hosts the strongest opposition to deregulation.

The sugar areas are Coalition heartland, and given that it was the first visit of the PM to the troubled industry, farmers gave Mr Howard a "fair hearing" and were less confrontational than they have been with their Federal and State MPs and the Queensland Premier over the past 18 months, at rallies and demonstrations led by the Sugar Industry Reform Committee.

There is a sense amongst farmers that the industry's future lies solely in the PM's hands, and that he will have one opportunity to get it right before the next Federal election.

Driving deregulation

Although the Federal Government is yet to announce a package, indications are that they are on the wrong track. For example, it has been reported that the PM's office has been on the phone repeatedly to the Canegrowers Board, the largest industry body, to sign off on almost total industry deregulation.

Also, the Government has shown no interest in mandating ethanol in fuel, which would be the best way of value adding to cane and securing the industry's future. This is despite the Brazilian Consul campaigning for Australia to become Brazil's co-supplier of bulk car engine grade ethanol to Japan. The Japanese won't become a major buyer of ethanol for engine fuel until there is more than one major international supplier. However, large-scale production of ethanol in Australia is unlikely until it is mandated in domestic fuel.

Instead, the Federal Government's approach seems to be that the problem is only the result of low world prices and bad seasons. So give farmers enough to tide them over the next year (and the next election) and hopefully by then, conditions will have improved. The government is yet to recognise that NCP and trade policy has so weakened the industry that it faces systemic collapse in Coalition heartland.

Worse still, there seems to be no recognition of the systemic collapse also in the dairy industry, post deregulation. After a recent visit to marginal Gippsland seats, the media headlines report the PM as saying, "Dairy and beef in great shape".

Yet dairy is losing 1,000 of its 10,000 remaining farmers a year. After deregulation the farm gate price of milk plummeted, such that farmes lost more in farm income than they received from the annual $200 million Federal restructure package!

Despite this, the line from government advisers has been, for example, that Farm Management Deposits (a fund to help farmers equalise their incomes over time) has been growing solidly, as if this alone was a true indicator of the state of the industry. Anecdotally, farmers have been putting into the fund, only to borrow at a faster rate from the banks.

Further, three Biosecurity Australia (BA) reports have reversed previous decisions disallowing imports of bananas from the Philippines, foreign pork and New Zealand apples.

These reports appeared following the decision to proceed with an Australia-US Free Trade Agreement (FTA). The Offices of the US Trade Representative and the powerful American Farm Bureau Federation have said that the FTA would depend on reform of aspects of Australia's quarantine restrictions.

Industry leaders are appalled at the poor science behind these reports. The reports appear influenced more by the Government's ideological commitment to free trade than quarantine concerns for Australian farmers. If these policies are adopted, these three industries will face collapse from imports and exotic diseases within a few years.

Indeed, the PM is solidly committed to the FTA. He has repeatedly said that Australia must lock itself into the US economy because the US will be the only super power and the world's dominant economy for the next 50 years. The PM really means it, and he may well see the FTA as his greatest political achievement.

For the apple, pork and banana industries, this means that they almost certainly cannot win their appeal of the BA decision using scientific argument, or even by concerted lobbying of Federal politicians, many of whom are highly sympathetic to the farmers and suspicious of Biosecurity Australia.

The Government's attitude to these industries could well have significant electoral outcomes.

In Victoria and NSW a number of "safe" Coalition seats are dependent on the dairy, apples/pears and pork industries. In northern NSW and coastal Queensland, the banana seats are also dairy seats, which in turn are sugar seats.

If the Government is to win the next election, it will have to put aside its ideological commitment to deregulation of sugar and dairy, and not sacrifice apples, pork and banana farmers on the high altar of "free" trade.